Purchasing Managers Index
From Wikipedia, the free encyclopedia
The PMI is a composite index that is based on five major indicators including: new orders, inventory levels, production, supplier deliveries, and the employment environment. Each indicator has a different weight and the data is adjusted for seasonal factors. The Association of Purchasing Managers surveys over 300 purchasing managers nationwide who represent 20 different industries.
A PMI index over 50 indicates that manufacturing is expanding while anything below 50 means that the industry is contracting.
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U.S. Economy: Incomes, Spending Keep Economy Growing
Incomes rose and personal spending rebounded in the U.S. last month, suggesting consumers may keep the economy growing in the face of downturns in housing and manufacturing.Americans earned 0.4 percent more than in September, the Commerce Department said today in Washington, and purchases climbed 0.2 percent after declining the prior month. Meanwhile, a business barometer from a Chicago-based group contracted for the first time in more than three years, a sign of weakening demand at factories. Another report from the government showed home prices grew the least in eight years last quarter.
Weak November start hurt retailers’ sales
The nation’s largest retailers reported mostly disappointing sales for November as sluggish performance early in the month outweighed a robust post-Thanksgiving start to the holiday shopping season.
Sterling in sight of $2 by year-end
The British pound has rallied to its highest level since 1992 versus the U.S. dollar, making the elusive $2.00 mark an increasingly realistic target before the end of the year, strategists said Thursday.
A weak dollar further exacerbated the move. The U.S. currency sold off sharply after a report showed business activity in the Chicago region slowed to its lowest level in more than three years in November, sparking concerns over a sharp slowdown in the U.S. economy.
Doji candlesticks
When the open price and the close price are equal, they are calle Doji Lines.Doji lines can have shadows of varying length.
- Long-legged - has long upper and lower shadow - indecision
- Gravestone - has only a long upper shadow,no lower shadow - bearish
- Dragonfly - lower shadow,no upper shadow - bullish
Economic conditions have improved slightly over the past month, with increasing retail sales and cautious optimism about the holiday-shopping season, the Federal Reserve’s latest survey of economic conditions found.
Contrary Opinion
The principle of Contrary Opinion holds that when the vast majority of people agree on anything, they are generally wrong.
A true contrarian, therefore, will first try to determine what the majority are doing and then will act in the opposite direction.
On-balance Volume (OBV)
On balance volume (OBV) is a technical analysis indicator based on a cumulative total volume. Volume on an up day (close higher than previous close) is added and volume on a down day is subtracted.
Volume as Confirmation in Price Patterns
The resolution ao all prices patterns(the breakout point) should be accompanied by heavier trading activity if the signal given by that breakout is real.
In a downtrend, the volume should be heavier during down moves, and lighter on bounces.
Open Interest Definition
- The total number of outstanding or unliquidated contracts at the end of the day
- The total number of derivatives contracts traded that have not yet been liquidated either by an offsetting derivative transaction or by delivery
Volume Definition
Volume is the number of entities traded during the time period under study.
Example : One registered market participant on Nasdaq buys 100 shares into inventory from another registered market participant or from one of its clients. In either case, it is counted as 100 shares.
Confirmation and Divergence
Confirmation refers to the comparison of all technical signals and indicators to ensure that most of those indicators are pointing in the same direction and are confirming one another.
Divergence refers to a situation where different technical indicators fail to confirm one another.
Dollar Drops as Cooling Economy May Prompt Fed to Lower Rates
Nov. 22 (Bloomberg) — The dollar weakened the most against the yen in almost three months on speculation the Federal Reserve will lower interest rates as the economy cools.
The U.S. currency declined against all 16 of the world’s most actively traded currencies after economic advisers to President George W. Bush yesterday cut their forecasts for growth next year. The dollar was close to a three-month low against the euro and approached the weakest this month against the yen before tomorrow’s Thanksgiving U.S. public holiday.
US initial job claims 312000
The number of people filing new claims for unemployment insurance in the latest week rose by more than expected to its highest four-week average in three months, the Labor Department said Thursday.
Initial jobless claims rose by 12k to 321,000 which suggest some cooling in the labour market. The number of claims for the previous week has been revised upwards to 309,000 from the previous 308.000. This reading has been much worse than expected, since analysts advanced a decline by around 2,000.
Differences Between Tops and Bottoms
Topping patterns are shorter in duration and are more volatile than bottoms.Price changes are more frequent and more violent on tops.
Bottoms have smaller price ranges, but take longerto build.
For this reason it’s easier,less costly and less risky to identify and to trade bottoms.
Volume is more important on the upside.The completion of each pattern should be accompanied by a noticeble increase in volume.
Speed lines
This technique was developed by Edson Gould and is an adaptation of the idea of dividing the trend into thirds.The difference from the percentage retracement concept is that the speed resistance lines(speedlines) measure the rate of ascent or descent of a trend.
Types of Trends
There are three different classifications of trend :
- major
- secondary
- minor
There are three trend directions :
- up
- down
- sideways
The Significance of a Trendline
What determines the significance of a trendline?
The answer is : the longer it has been intact and the number of times it has been tested.
The more significant the trendline, the more confidence it inspires and the more important is its penetration.
The correct drawing of a trendline should include the entire day’s trading range.
Basic Tenets
- The averages discounts everything
- The market has three trends
- The averages must confirm each other
- Volume must confirm the trend
Volume should expand or increase in the direction of the major trend.Dow considered volume a secondary indicator. He based his actual buy and sell signals entirely on closing prices.
The Randow Walk Theory
Any process appears random and unpredictable to those who don’t understand the rules under which the process operates.
The illussion of randomness gradually disappear as the skill in chart reading improves.